Why does satellite TV still have a 2-year commitment?

Very few of the services you use today still have some sort of annual contract. Thank — or blame — techies from a decade ago. It was common in past decades to get a lot of free equipment in exchange for an annual or biennial contract. The original iPhone, although it cost over $700 in other countries, was $200 in the US for those who took a two-year contract. Satellite TV has had annual contracts for decades. With a few exceptions, which I’ll get into in a minute, annual contracts have disappeared because people didn’t want them.

Those techies from a decade ago…

The decade between 2003 and 2013 was a time of great innovation in cell phone tech. Phones became fashionable with the coming of the Motorola RAZR, and they became more useful with devices like the Handspring Treo, one of the first actual smartphones. We went from Palm/Handspring devices straight to Blackberries and then to iPhones and Androids, in very rapid succession. The problem was, no one wanted to wait two years to trade in their phones.

At the same time, used phones were beginning to hold their value better, so it became possible to sell your old phone to finance the new one. The only problem was those pesky contracts. Cell phone companies like AT&T were happy to oblige, offering no-contract plans for those who bought their phones outright. They even created fancy plans like AT&T NEXT where you paid for a phone on an installment plan and traded it in when you wanted.

Getting rid of free equipment made it possible to get rid of the annual contract, and everyone was happy.

So why was satellite TV left behind?

A funny thing happened while cell phone companies were getting rid of contracts. Cable companies actually started adding them. Phone, cable, and internet providers were always month-to-month. This goes back to the days when the only wire coming into your house carried phone service. Even in the early days of internet service providers, they were always month-to-month. And then, those companies realized they could make customers pay for equipment upgrades. At the same time when cell phones were going from dumb to smart, cable companies went from analog to digital and then added DVR and high-speed internet. These upgrades cost money.

Companies like Verizon, Comcast and Charter, perhaps emboldened by DIRECTV and DISH and their two-year commitments, started offering customers optional price breaks for two-year contracts. In many places these companies had no choice. The cities they served forced them to offer a month-to-month plan, but they weren’t required to make it a good deal.

So, the world of pay-TV still has contracts. DISH and AT&T have month-to-month streaming options, but the satellite products still have commitments. Satellite TV providers still offer their customers a lot of free equipment and installation services, and since customers won’t pay more per month, having that two-year commitment ensures the companies get their investment back.

Will this ever change?

Never say never, but DIRECTV and DISH seem satisfied to drive people toward AT&T TV NOW and Sling when they want a month-to-month option. It’s hard to know what the future will bring. For now, don’t expect that 24-month commitment to go away any time soon.

About the Author

Stuart Sweet